Insolvency regulator IBBI has taken the next logical step to facilitate insolvency professional entity (IPE) to take up the role of resolution professionals in corporate insolvencies. It has amended the Model Bye Laws regulations on Insolvency Professional Agencies (IPAs) to allow an IPE to be enrolled as a “professional member” with the agencies.
Only those IPEs that are recognised by IBBI and registered as an “insolvency professional” have been allowed to enrol as “professional member” of IPAs. It is only those who are authorised as “professional member” by an IPA who can take up the role of IP in a corporate insolvency.
Also IBBI has now stipulated that the professional agency is required to maintain details of partners or directors, where the professional member is an insolvency professional entity
IPAs are basically not-for-profit entities that are considered to be the frontline regulators of IPs under the insolvency regime in India. The IPAs— so far there are only three —basically enrol, educate, monitor, regulate and guide the insolvency professionals (IPs).
IPAs have the responsibility to develop and regulate the profession of IPs. They carry out quasi-legislative, executive and quasi-judicial functions.
Hitherto, only individuals could be enrolled as “professional members” of IPAs. The latest changes to the Model Bye laws regulations for IPAs comes on the heels of IBBI allowing IPEs to run corporate insolvencies.
Allowing an IPE to act as an IP will institutionalise the profession of IP and help establish better governance framework. This is expected to address the limitations posed by IP being an individual in dealing with large and complex processes requiring concurrent efforts and actions, according to IBBI.
Gaurav Gupte, Partner, Cyril Amarchand Mangaldas, said this is a welcome development as adjudicating authorities and creditors can consider the institutional expertise of such entities before appointing them, and the entities can also bring to the table a wider set of experiences and skill sets. Hitherto, since only individuals were permitted to become insolvency professionals, a practice of dual appointments of individuals as resolution professionals/liquidators and insolvency professional entities to assist them, was being followed. The latest amendments will formalise such arrangements and allow the insolvency professional entities to develop deep expertise, he said.
Siddharth Srivastava, Partner, Restructuring & Insolvency, Khaitan & Co, said that the amendments to model bye laws by IBBI are basically to streamline and facilitate IPEs to take up the role of resolution professionals. “These amendments have been effectuated in light of the recent move by IBBI allowing IPEs to run the CIRP of a corporate debtor. The amendments in the model bye laws are reflecting consequential changes with a broad objective to ensure recognition of IPEs as resolution professionals”, Srivastava said.
Mukesh Chand, Senior Counsel, Economic Laws Practice, said, “Since Model Bye-Laws and Governing Board of Insolvency Professional Agencies Regulations, 2016 also contained provisions for registration of only individual therefore, it required requisite corresponding changes in line with change in shift to the policy of the Board to allow IPEs to act as IP. Accordingly, relevant changes have been made in the Model Bye-Law Regulations to that effect.“
Yogendra Aldak, Partner, Lakshmikumaran and Sridharan Attorneys, said that the latest IBBI move would allow a greater number of experts to be part of the resolution process as against an individual professional, resulting in improved quality and effective resolution of CIRP. “The accountability in the resolution process will be more as the details of partners or directors, where the professional member is insolvency professional entity, will be available with the professional agency”, Alaak said.
Till date, there are three IPAs registered with the Insolvency & Bankruptcy Board of India (IBBI). These are ICSI Institute of Insolvency Professionals, Indian Institute of Insolvency Professionals of ICAI and Insolvency Professional Agency of Institute of Cost Accountants of India.